\nhome loan. Usually, the down payment is around 10-20% of the value of the house. The Reserve Bank of India
\n(RBI) mandates banks to give 70-90% of the property value as home loans. Hence, the rest has to be funded by
\nthe buyer in the form of a down payment.<\/li>\n
\naround 30 years. Borrowers have to pay back the principal and interest during this period.<\/li>\n
\nbank to repay your home loan. The EMI consists of both the principal and interest and the proportion of the
\nprincipal and interest keeps changing as you progress in your home loan tenor.<\/li>\n
\nthe house. Lenders usually give only a portion of the property’s value as a loan. This is determined by your
\ncredit history, loan amount, and property type.<\/li>\n
\nof the loan, then the loan is said to be a fixed-interest home loan.<\/li>\n
\nhas a floating interest rate regime. The interest of your home loan is pegged to a benchmark rate such as
\nthe repo rate. Hence, whenever the repo rate changes, the loan interest rate also changes.<\/li>\n
\ntaking various factors into account, such as your credit history, credit utilization, length of credit, and
\ntypes of credit accounts. The credit score keeps changing over the tenure of your loan based on how
\nefficiently you repay your loans. Banks check your credit score to decide the loan amount and interest rate
\nthey can offer you. A high credit score can get you a low-interest rate.<\/li>\n
\nloan. It contains all the details such as the loan amount, interest rate, EMI, and tenor of the loan.<\/li>\n
\nhome loan, the property that you are investing in is a collateral against which the banks offer you a loan.<\/li>\n
\ndisbursement. The disbursements can either happen in one go or in partial instalments as per your agreement
\nwith the bank and the builder.<\/li>\n
\nan EMI for the entire tenure of the loan is an amortization schedule.<\/li>\n
\ncertain penalty on unpaid EMIs.<\/li>\n
\nis known as prepayment. The money you prepay goes towards the principal and hence reduces the total interest
\nobligation. However, it is important to check with the bank for any prepayment penalties.<\/li>\n
\nyour loan is complete, then it is called foreclosure. RBI mandates banks not to change any fee or penalty
\nfor foreclosure of home loan accounts.<\/li>\n<\/ul>\n
<\/p>\n
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\n![\"Home](\"https:\/\/jupiter.money\/content\/images\/2024\/08\/Home-Loan-EMI-Calculator-Feature-image.png\")
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Free Home Loan EMI Calculator<\/p>\n
Check your home loan EMI, prepayment and savings on interest with our free Home Loan EMI Calculator<\/p>\n
\n
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Calculate My EMI & Savings<\/div>\n
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<\/p>\n
Types of Home Loans in India based on the use cases<\/h2>\n
There are various types of home loans in India based on how the loan amount is used. Below are the common types
\nof home loans.<\/p>\n
- \n
- Home Loan: <\/strong>A home loan is an amount you borrow to buy an apartment, villa, or an individual
\nhouse for the purpose of staying in it or renting it out. The home can be a ready-to-move-in or an
\nunder-construction property. This is the most common type of home loan and has a fixed or floating interest
\nrate regime. Banks usually lend 70-90% of the value of the house as a loan. To get this loan, you must meet
\nthe bank’s eligibility criteria and provide all the required documents. Once verified, the bank will
\ndisburse the loan into your savings account through which you can pay the builder.<\/li>\n- Home Construction Loan: <\/strong>If you own a piece of land and want to build your own house instead
\nof moving into a pre-constructed home, you can take a home construction loan. This loan is given on the
\nbasis of a rough estimate of the construction costs. The process to take this loan is slightly different
\nfrom a regular home loan. Banks will have a different set of eligibility criteria, and you must first check
\nwhether you are eligible to get such a loan or not. Once you get the loan, the bank will either disburse the
\nloan amount in full or in instalments as per your wish.<\/li>\n- Home Extension: <\/strong>If you already have a home and want to add another floor or additional
\nrooms to it, you can take a home extension loan. Not many banks offer such loans, but when they do, they
\nhave a rigid eligibility criterion. Hence, check with your bank and compare it with other banks offering
\nsimilar loans and choose the one which is most convenient to you, both in terms of the conditions and
\ninterest rate.<\/li>\n- Home Improvement Loan: <\/strong>All homes have some kind of repairs time and again. Or you may want
\nto beautify your existing home by changing its interiors or painting it. To fund the repairs such as
\nwaterproofing, plumbing, electrical lines, or even painting, you can take a loan from banks. This loan is
\ncalled a home improvement loan. Although not all banks give such loans, there are many banks that do. All
\nyou have to do is find the right bank for you.<\/li>\n- Home Loan Balance Transfer: <\/strong>If you are not satisfied with your current bank, you can move
\nyour home loan to a new bank. This is called home loan balance transfer. Here, your entire remaining loan
\nbalance is transferred, and you can even get better terms, such as lower interest rates, low processing
\nfees, and flexible tenure, which will help reduce your EMI.<\/li>\n- Composite Home Loan: <\/strong>A composite home loan is a comprehensive loan solution for individuals
\nlooking to buy a plot and construct a house on it. The loan covers both the plot and construction cost of
\nthe house. These loans suit people who want to start construction on the land immediately after purchasing
\nthe property instead of waiting for a few years. The banks give a fixed time period within which the
\nconstruction of the house must begin. If the construction doesn’t begin, then the interest rate could
\nincrease.<\/li>\n- Plot Loan: <\/strong>A plot loan is for people who want to buy a plot of land with the intention of
\nconstructing a house in the future. The loan can also be taken if you want to purchase a plot of land for
\nthe purpose of resale.<\/li>\n- Home loan top-up: <\/strong>A top-up loan is an additional loan on top of your existing loan. The
\namount of loan you can get varies across lenders. In most cases, banks give such loans to customers with
\nlong-standing relationships, good credit scores, and repayment ability.<\/li>\n<\/ul>\n<\/p>\n
Types of Home Loans in India based on the interest rate<\/h2>\n
Based on the interest rate, there are three types of home loans, namely fixed interest, floating interest, and
\nhybrid home loans.<\/p>\n- \n
- Fixed interest rate home loan: <\/strong>A fixed interest rate home loan is a type of loan where the
\ninterest rate remains the same throughout the tenure of the home loan. This loan is preferred by people who
\nwish to avoid fluctuations in the interest rate due to inflation. The interest rate, in this case, is
\nslightly higher than that of floating interest rate home loans. However, when the RBI decides to spike repo
\nrates, the interest rate on these loans will remain the same. This is best if you want to take a home loan
\nfor a tenure of three to 10 years. It is important to note that these kinds of loans have a prepayment
\npenalty.<\/li>\n- Flexible interest rate home loan: <\/strong>A flexible interest rate home loan is a type of loan
\nwhere the interest rate keeps fluctuating throughout the tenure of the loan. This is because flexible
\ninterest rate home loans are tied to a benchmark interest rate, which is changed at RBI’s discretion to
\ncontrol the inflation and money supply in the country. With changing interest rates, banks usually change
\nthe tenure of the loan. An increase in interest rate increases the tenure. However, RBI recently gave a
\ncircular mandating banks to let the borrowers decide whether they want to change their EMI or tenure or both
\nwhen the interest rate changes.
\nThe interest rate of this loan is slightly lower than a fixed interest
\nhome loan and is best for a tenure of 20-30 years. They also do not have a prepayment penalty, unlike
\nfixed-interest home loans. However, financial planning and budgeting, in this case, can be very tricky and
\nchallenging.<\/li>\n- Hybrid home loan: <\/strong>A hybrid home loan is one where the interest rate remains fixed for a
\ncertain tenure, after which it changes to a floating interest rate. This type of home loan is suitable for
\nborrowers who prefer stability of interest rate for a certain period of time before switching to a floating
\ninterest rate regime.<\/li>\n<\/ul>\n<\/p>\n
Benefits of taking a Home Loan<\/h2>\n
- \n
- Makes it easy and affordable to buy a home: <\/strong>Taking a home loan can help in buying a home.
\nWith real estate prices skyrocketing, buying a home with savings is becoming a farfetched dream. A home loan
\nwill help you buy your dream home with affordable instalments.<\/li>\n- Helps build an asset: <\/strong>When you buy a home, you are building an asset. This asset will be
\nappreciated over a period of time, increasing the value of your home.<\/li>\n- Saves you from paying rent: <\/strong>Rent is a major expense for any individual. With rent
\nincreasing year-on-year, it is becoming more affordable to buy a home and pay an EMI instead of the rent.<\/li>\n- Due diligence of property: <\/strong>When you take a loan, the bank will assess the property
\nthoroughly. It verifies all the documents provided by the builder to ensure the builder is genuine and there
\nare no frauds. Hence, taking a home loan will save you from being scammed by the builder.<\/li>\n- Tax benefits: <\/strong>Home loan offers several tax benefits. The principal and interest payments
\nare eligible for tax deduction under sections 80C and 24B of the Income Tax Act, 1961. You can claim tax
\nbenefits on principal repayment of up to Rs 1.5 lakhs per annum and interest of Rs 2 lakhs per annum. In
\ncase the loan is for a second house, then you can claim a tax deduction for the entire interest paid for the
\nloan under Section 24B. However, it is important to note that the deductions are only available for fully
\nconstructed properties and not for under-construction properties.<\/li>\n- No prepayment charges: <\/strong>Banks don’t charge prepayment charges for most home loans, unlike
\nother loans. So, when you have excess funds, you can prepay a part of your loan to reduce the interest
\nburden. It is important to check with your bank for any prepayment charges before you take this step.<\/li>\n- Balance transfer facility: <\/strong>Sometimes, other banks give you a lower interest rate for your
\nexisting home loan. In such a case, you can transfer your home loan from your bank to another bank. However,
\nyou will have to go through the entire loan procedure again with the new bank. This includes submitting all
\nthe documents and paying a processing fee.<\/li>\n- Long repayment tenure: <\/strong>Home loans have a long repayment tenure when compared to other types
\nof loans. This reduces the monthly EMI burden on your pocket and also makes it affordable to buy a home.<\/li>\n<\/ul>\n<\/p>\n
How can I get a home loan?<\/h2>\n
Beginning your home loan journey can feel overwhelming with multiple banks offering different schemes. Depending
\non whether you\u2019re salaried or not, banks offer a wide range of interest rates along with some complementary
\nbenefits like top-up loans or insurance plans. So first evaluate which plan suits you best based on your current
\nneeds and stage of life. Whatever you choose, Aditya recommends getting a floating interest plan instead of a
\nfixed one, as those are usually lower.<\/p>\nThe next thing you\u2019ll need to do is check your home loan eligibility based on your credit score. Having a good
\ncredit score naturally indicates that you are a responsible borrower and you pay your EMIs back in time. If you
\nthink your lack of credit history might be a problem, we suggest getting a credit card and building your credit
\nscore with timely payments.<\/p>\n<\/p>\n
Things to consider before taking a home loan<\/h2>\n
Whether you\u2019re getting an asset-backed home loan that you can sell to recover your EMIs or you\u2019re just getting a
\nloan because you don\u2019t want to self-fund it with your entire corpus but still wish to make an early purchase for
\na better life, here few things to keep in mind about how you structure and approach your loan:<\/p>\n- \n
- Ideally, you\u2019d have to fund 20% of the home cost with your corpus upfront, while the rest is paid by the
\nbank. Most builders take 10% of the amount while the house is being built and another 10% nearing
\npossession.<\/li>\n - Try and structure your down payment in a way that helps you build your corpus- You can pay 5% at the start
\nand the pending 15% closer to possession during which your corpus increases.<\/li>\n - For ready-to-move-in properties, the entire amount gets disbursed in one go. For houses that are
\nunder-construction, only 20-30% gets disbursed in the first year, so the EMI\u2019s are smaller and income is
\nslightly higher until you get possession.<\/li>\n - Remember that if you\u2019re in a subvention with your bank and builder, you probably can\u2019t switch later, so you
\nneed to take note of the interest rate post-subvention. (For the uninitiated, subvention is when the home
\nbuyer, banker, and the developer enter into a tripartite agreement where the buyer pays 5-20 percent of the
\nmoney upfront. The rest is paid by the bank.)<\/li>\n - There are two approaches to taking a home loan. The first is where you maximize the size of the loan in the
\nbeginning and then switch to a low-cost lender. The second is to start with a low-cost lender like a PSU so
\nthat you can minimize interest.<\/li>\n - If you get an overdraft loan then it adjusts the principal and interest and you can deposit excess cash as
\nwell as withdraw it when you need it.<\/li>\n - You\u2019re going to have to pay a registration fee of 5% based on which city you\u2019re buying a home in.<\/li>\n
- Remember- every builder would want to sell their inventory and every bank will look to increase their
\nbusiness, so you need to make decisions that are well-thought-out and trust your gut if you sense trouble.<\/li>\n<\/ul>\n<\/p>\n
Eligibility & Documents Required for a Home Loan<\/h2>\n
The eligibility criteria to get a loan varies across banks, but the following is a broad criterion for most
\nbanks.<\/p>\n- \n
- A decent credit score (usually above 750 is preferred)<\/li>\n
- Minimum annual salary<\/li>\n
- Collateral security<\/li>\n
- Residency status<\/li>\n
- Stability and continuity of occupation<\/li>\n<\/ul>\n
<\/p>\n
Following are the documents required to avail of a home loan in India<\/h2>\n
- \n
- Loan application form<\/li>\n
- Passport size photographs<\/li>\n
- Identity proof such as a Pan Card, Aadhar Card, Passport,<\/li>\n
- Address Proof such as Aadhar Card, Passport, and Utility bills<\/li>\n
- Last six months’ bank statements<\/li>\n
- A cheque for processing fee<\/li>\n
- Latest salary slips, proof of business, or any other documents with proof that you are earning income from a
\nsource<\/li>\n - Last three years’ income tax returns<\/li>\n
- Form 16<\/li>\n
- Profit and loss statements of business (if any)<\/li>\n
- Statement of loans availed in the last two years (if any)<\/li>\n<\/ul>\n
<\/p>\n
How to understand my home loan interest and EMIs?<\/h2>\n
When you apply for a home loan, chances are that your lender will also apply several additional fees such as
\nforeclosure charges, prepayment charges, EMI bounce penalties, processing fees, etc. So before you go ahead with
\nthe loan, you\u2019d have to thoroughly go through the agreement to understand everything you\u2019re being charged for.
\nIn terms of the interest rate, here\u2019s a quick video on how you can reduce interest on your home loan.<\/p>\n
\n
- Helps build an asset: <\/strong>When you buy a home, you are building an asset. This asset will be
- Flexible interest rate home loan: <\/strong>A flexible interest rate home loan is a type of loan
- Home Construction Loan: <\/strong>If you own a piece of land and want to build your own house instead